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Articles
on Real Estate Investing
Any decision to buy or sell a house invariably turns out to be an emotional one. A study has revealed that people tend to buy properties more due to emotion and not based on logic. As you approach the prospects of buying your next home or investment property or selling either, for that matter, keep in mind that you're about to go through a Grand Canyon of emotional ups and downs. It is said that while buying properties, people gain emotional rewards but they subsequently justify their purchase with logical reasons. Market men say that the buy/sell advertisements must trigger emotions that will persuade the prospects to impulsively act. The single largest reason why people buy homes is in response to their emotions. A study on emotions and their effects on the buying process conducted by University of Florida stated "Americans More Likely to Let Their Emotions Do the Buying" and "emotions were nearly twice as important as knowledge in buying decisions."
It is interesting to note that several sales training institutes even has a course entitled: "Emotional Response Marketing - The Key to Producing Results." Quite often a buyer buys properties because he liked the property appealed to his ego, sense of pride, or even a feeling on envy that he should have more than the John next door. People never buy a house in a spirit of emotionless stoicism although they later hypocritically justify the decision as being logical. If we all purchased homes only based on logic, then we would be living in the most basic property that met our basic needs. But it is never the case. Honestly speaking, part of the real estate frenzy of the last several years was driven by emotions.
However, there is no denying that it was the emotional approach that instant riches would follow that got more people into real estate than the fact that it was a good investor websites this business of real estate investing is clear that letting your emotions unduly interfere with your decision may prove disastrous. Instead, you need to have a powerful mindset to grow and succeed. The biggest enemy to your real investment gains is not the market but you and your mental make-up. Your biggest enemy is of your emotion. You must also have the right mindset if you want to belong to the group of real estate investors who actually succeed.
Some of the most common mistakes people impulsively make in their real estate buying/selling decisions are - buying for the sake of owning a property, even if it's not the best one to buy, buying because it is cheap, without even analyzing why it is selling at that price, opting for the second best, simply because they cannot afford anything better instead of looking in another location, to find a better property, needlessly improving a property on the wrong location where the spending cannot be recovered.
With so many resources available, you can get confused on which direction to take your real estate investments. The world of real estate is like a jungle, where only the fittest will survive. A real estate transaction is often a very emotional experience for a lot of people, specially for first-time buyers. If you do not manage your emotions well, you can end up committing serious mistake. Recognize that our emotion in real estate investment has no monetary value and, as a matter of fact, misplaced emotions can even lead to serious losses. The one guiding principle for successful real estate investment is ' emotionless; be objective
NNN Real Estate derives its name from what is called a triple-net leased property. When an investor purchases NNN Real estate they essentially own a single-tenant free standing commercial property. The single tenant is locked into a long-term non-cancel able NNN net lease. The owner then has an investment property that is bringing a steady flow of secured income from a tenant responsible for the operation, taxes, capital improvements and maintenance of the property. The variable for investment risk is focused on the tenant, such as their credit rating and debt-income ratio. Other factors that determine a NNN properties risk are the property’s capitalization rate, terms of the loan and investor's cash flow.
You will reap quite a few benefits by having NNN properties as part of your real estate investment strategy. Firstly, the nature of the leases offers security so that you need not bother about vacancy rates and tenant turnover. You well not be required to pay management fees and capital improvement costs that will deplete your return on investment. You can buy these properties to participate in a 1031 NNN tax deferred exchange. 1031 NNN tax deferred exchanges increase the liquidity of your real estate investings will embolden you to become more aggressive with real estate investment. Finally, it allows continuous stream of income from the lease.1031 of the Internal Revenue Code is a complex bundle of requirements and deadlines.
The types of properties that legally qualify as 1031 NNN real estate exchange keeps changing as new court rulings, IRS rulings and amendments change. It is necessary to involve a trusted and reliable 1031 NNN Real Estate expert who can steer you through the vast array of properties, tenants and regulations so that you can effectively invest with maximum return on investment and minimal with NNN properties. Please note that the 1031 exchange permits real estate investors to utilize the IRS tax benefit to retain as much of their capital gains for reinvesting to build their real estate portfolio. 1031 of the Internal Revenue Code makes clear that if an investor follows the parameters of the code, then they can legally avoid paying capital gains and depreciation recapture taxes.
The parameters are strict and courts and the IRS are constantly introducing rulings on the 1031. It is imperative that a real estate investor fully understands the demands of 1031. It is critically important to know that 1031 deadlines are inviolable and if you miss them you will be subjected to capital gains taxes. It is advisable to begin searching for potential properties even before your relinquished property is sold so that you will not be trapped trying to meet the 45-day deadline. The 1031 Exchange requires the filing of the legal paperwork through a Qualified Intermediary. The Qualified Intermediary is in direct receipt of the proceeds from the sale of the relinquished investment property and transfers the money directly to the closing agent for the new replacement property.
As you search for a Qualified Intermediary, make sure they are well versed in the all types of 1031 Exchange transactions. The IRS stipulates that the potential 1031 exchange properties be identified within 45 days from the closing of the relinquished property. The 1031 Exchange transaction must be complete within 180 days from the close of escrow of the relinquished property. These time limits have to be honored at all costs. The IRS also stipulates that real estate investings title in the same form in the replacement property as they held in the relinquished property.
When attempting 1031 Exchange, make sure you consult with an experienced senior tax advisor who has a thorough understanding of all tax implications to guide you properly at every turn.
Mortgage Calculator is a program that helps the homebuyers to calculate the payments that have to be effected on a monthly basis on the mortgage. Mortgage calculator is an aid to let you know how much amount you should avail for a fixed rate of interest so that you can comfortably pay. As most of us are aware, mortgage loans are available in various forms and the rate of interest can either be fixed or changeable. The time period for repayment or the terms and conditions can also vary.
There are also options for the periodicity for making repayments - which can range from twice in a week to a monthly basis. Mortgage Calculator helps solve this confusing arithmetic. A Mortgage calculator is specially designed to assist you with all the difficult calculations. You need to note down your day to day expenses, your earnings and you can calculate the amount of the repayment on a monthly basis. Mortgage calculator is also helpful in calculating the real price of the loan by comparing various loans, rate of interests, and their costs.
As you enter the relevant particulars, the mortgage calculator provides you with the plan for the amortization, sum total of the price, and the amount of refund. While you are deciding for a mortgage it is an obvious fact that nobody is familiar with the complex process of the mortgage. Here the mortgage calculator is useful as it calculates which mortgage you should finalize and the one most beneficial for you and the right amount that you should borrow. A mortgage calculator certainly helps you save some amount of cash.
Many banks and mortgage lenders offer mortgage calculators free of cost for you to determine the loan amount. You will have to exercise caution if you are working on an e-mortgage calculator as any personal details you furnish can be misused. Once you provide your personal details like your residence address, email address or the telephone number, then it is quite likely that you will start receiving unnecessary telephone calls or email messages from unknown sources.
The safer thing is to opt for a mortgage calculator which has provisions only to enter financial particulars like- the rate of interest and what is the amount that you are planning to borrow etc without calling for your personal information. The one limitation with mortgage calculators is you will not able to save the calculations made. It becomes irksome when you are comparing with various other mortgage loans. You will have to keep doing the arithmetic time and again. Further using an e-mortgage calculator poses threat for viruses. You will have to necessarily use a mortgage calculator from a reliable source and it is also recommended to run a virus check before using it.
A mortgage calculator has its limitations. Mortgage calculator does not assist in keeping a record of the refunds of the mortgage or provide you with details of what will be the actual cost of the loan that you have to pay. With so many types of home mortgage loans available in the market, the home mortgage calculator is becoming an indispensable tool. They are a great help for doing any kind of projection you wish to make. Home mortgage calculators are specialized designed tools created to help you. It is used for estimating how much you are going to pay each month for the coming years.
Building a "Green home" refers to building an environmentally-sensitive home. The common goal of building a green house is to create a home that is economical, energy efficient, non-toxic, soothing to the soul, kind to the environment, and pleasing to behold. It is a must for home builders, contractors, and architects to know the art of building the green homes.
A green home should reduce the environmental impact through passive solar heating and cooling techniques, solar electricity, wind power, and micro-hydropower. The green home should also have safe and economical ways to obtain clean drinking water and treat wastewater.
The art of building green homes requires the knowledge of an overview of green building techniques, materials, products and technologies that are currently available. Through knowledge of green building materials, earth-sheltered architecture, passive solar heating and cooling, sustainable approaches to water and waste, energy efficiency, and environmental landscaping, helps in constructing a superb environmental- friendly and energy-efficient green house. Learn what green building is, what standards constitute green building and how you can put it to use for your home building business.
Building energy-efficient homes in an environmentally friendly manner requires a complete overhaul of the construction process and a re-education of the trades and suppliers. The goal of courses focusing on the art of building green homes is to provide training to builders and homebuyers for environmental friendly, healthy and energy efficient building practices and products. This residential guide to design and build a green home was developed as part of the Sustainable Futures II course offered at Michigan Technological University in Houghton. The guide provides so much information about green buildings. Companies such as 'Evergreen Homes' and 'Toronto' help build energy efficient green homes.
One of the most convenient methods in which to guarantee that you are building a green home is to build it to meet a set of criteria designed by a green certification program such as LEED for Homes, EarthCraft House, ENERGY STAR, and HealthyBuilt. To officially receive one of the above green certifications, homes must first pass inspections by certified inspectors.
Green homes appear much like any other home or building, but the benefits of a green home are diverse. They are designed to save money, use energy and water efficiently, reduce waste and create over all healthier environments for living and working. Reducing the environmental impact of homes is an important step towards fighting global warming and conserving valuable natural resources. The other benefits are reduced material consumption, lower energy costs, lower water bills, low maintenance due to durability, increased home value, affordability, potential lower insurance costs and potential tax credits & incentives.
The superior energy efficiency of a green home reminds us that it's truly a high-performance home. Attention to detail and durable, sustainable materials makes a green home far superior to the average home on the market and results in numerous health benefits. Along with drastically improved air quality and reduced exposure to mold, mildew and toxins, green homes also maintain consistent temperatures and humidity levels throughout the home.
Today, however, green building is gradually becoming a reality, infiltrating every facet of life. Now, green building allows you to build the home of your dreams, and rewards homeowners with a healthier home for both their family and the environment. The green homes of the 20th Century were simple, ultra modern and cold. But the 21st Century green homes should be stylish, healthy, high-performance home perfectly suited to any lifestyle.
The various real estate market investment strategies are:
Pre-Foreclosure Properties This is a method whereby you buy properties where the owners are in default on their mortgages and the foreclosure process notified.
Post-Foreclosure Properties These are properties that have been formally foreclosed and confiscated by the mortgage lender or the lending banks.
Distressed Properties Distressed properties that are below market valuation are available in the market. Be knowledgeable about your market prices and work out the real costs of financing, repairs, holding and selling costs before you venture into this type of transaction.
New Development Buying This is an early bird strategy that involves buying homes in the first phase of a new housing development. Once again this strategy will work to your advantage only if you are in a market with rapid real estate appreciation.
Buying Land for construction This method needs financial resilience and knowledge you can make handsome gains by buying land and then building a home. One of the best scenarios is to buy enough land to build and sell finished houses or apartments.
Buy and Hold Buying homes or multi-units and holding it for a sufficiently long period are assured profit-making strategy. But you need to analyze all the implications of financing, holding costs, vacancy factors, taxes, property management, maintenance etc.
Flip Strategy Buying home for a quick flip is also a regular strategy. With this method you have a little more flexibility on the financial side since you will not be holding the property for a long period of time.
Investing in real estate market carries less risk than many other forms of investments. But investing in the real estate market without having adequate market knowledge may involve risk. A knowledgeable investor can obtain handsome profits from the real estate market in despite of the fluctuations. Comparable to the stock market, real estate investment does not fluctuate sharply and there cannot be an overnight rapid fall in the prices.
An experienced and professional real estate investor will be able to guide you with more information regarding the real estate investment market. This information will highly help you while making a buy/sell decision in real estate. The main requirement of the realtor is to be up to date with the happenings in the real estate market.
Economy plays a crucial role in determining the value of the property. Because when economy is affected, then the value of the property also comes down. When number of properties has been offered in the real estate market for good price, then it is a good indicator for the changes in the market trend.
If the number of properties listed in the market becomes low, then prices increases due to the demand and supply theory. Price fluctuation in real estate market occurs depending upon the season. The critical factor of the real estate investor is exercise care while making a decision in buying or selling a property. The investor should analyze the value of the property before he/she decided to purchase the property. A good real estate investor should plan the strategy for purchase or sale in the real estate market. There is no room for speculation in the real estate business.
There are quite a few proven methods of investing in real estate that can generate wealth for you. In the real estate investment business the right tools are thorough knowledge of the market, adequate financial resources, the ability to decide when to buy/sell etc. There are many proven methods to invest in real estate but you should be informed as to where your local market is in terms of the real estate cycles. Not all real estate strategies work successfully in all markets. You need to arm yourself with knowledge and tools to apply the right strategy for your particular market.
Inflation worries, caused by steep rise in consumer spending accompanied by a rise in inflation, have resulted in major lending institutions to raise their 30-Year mortgage rates to above 6 percent. The average rate rose to 6.17 percent in some markets, compared with less than 5.96 percent reigning till lately. Financial analysts consider the worry about inflation to be a major factor in the rise of long-term bond yields over the past week, which has a direct effect on mortgage rates. Many of the analysts are also expecting a marked slowdown in consumer spending in the immediate future as the worry over the housing market and credit markets persist.
One of the chief reasons why the housing market is in a slump is because sub-prime credit is becoming harder to obtain in many markets. This has led to a glut of housing on the market and is expected to worsen further. Many credit analysts predict that further concerns over inflation and consumer debt will lead to even tighter credit standards that will be practiced by many of the major lenders. After almost five years of boom activity in the housing market, a severe slump is now underway and sales have considerably dropped and home prices have fallen substantially. Home sales were down almost 9% since the same period last year, and an astounding 34.4% compared to 2005.
Now it is learnt that delinquencies on mortgage bills have spread well beyond those with sub-prime credit and this demonstrates that even prime borrowers have increasingly fallen behind on their house payments. The figures may appear small so far but if delinquencies on prime loans— given only to those with good credit — could rise further, then the housing crisis may prolong indefinitely. As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are also falling behind on their payments for home loans. The rise in prime delinquencies, while less severe than the one in the sub-prime market, nonetheless poses a threat to the battered housing market and weakening economy. Unlike sub-prime borrowers, who tend to have lower incomes and fewer assets, prime borrowers have greater means to restructure their debt if they lose jobs or encounter other financial challenges.
Amid worries over inflation, mortgage rates have surged to new highs. According to Freddie Mac, rates on 30-year fixed mortgages rose to 6.32 percent which is nearly a quarter of a percentage point compared to previous weeks. The last time the 30-year fixed rate mortgage was higher was Oct. 25, 2007 when the rates were even higher - at more than 6.74 percent.
With the growing concern of inflationary trends in America and abroad, sales are not expected to rebound before 2009. Meanwhile, mortgage issuers are obviously trying to protect their financial assets by adopting less risk which is leading to higher mortgage rates, especially on long-term loans. Given the current backlog of housing on the market, it would take another 9 to 10 months to clear the glut from the pipeline according to industry experts.
It is reported that the single largest contributor to the 2007-2008 real estate disaster in USA has been the avarice of mortgage dealers and their eagerness to make quick profits. They seem to be not particularly concerned about the long term impact on the economy and their greed, it is claimed, manifested itself in three primary ways - pay option adjustable rate mortgages, stated income loans and massive appraisal fraud on the part of homebuilders.
Pay option adjustable rate mortgages is ruinous for the consumer and for pension funds or mutual funds. It is said that this type of adjustable rate mortgage allows the consumer to choose among several payment options each month, including what is called a minimum or limited payment which can actually result in negative amortization, leaving the borrower with a bigger debt than they when he initiated the loan. As regards stated income loans, the borrower, broker, or bank deliberately makes up or falsifies the borrower's income in order to get loan approval knowing full well the borrower would not be able to make the mortgage payments.
Massive appraisal fraud occurred when homebuilders conspired with the appraisers to over-value the newly-built homes by as much as 30 percent. As a result, homeowners in existing neighborhoods naturally assumed their houses were worth more than they actually thought them to be. The artificial rise in real estate prices resulted in a huge unearned income for most homeowners. By taking home equity loans and refinancing the mortgage, they multiplied their profits. According to Federal Reserve chairman Alan Greenspan, they made $600 billion last year on the hypothetical appreciation of their properties and this huge profit went into reckless spending at the mall, on holidays, new cars and other forms of revelry.
Banks enthusiastically loaned whatever amount borrowers demanded as the banks were only concerned with selling the loan, pushing the default risk onto buyers of mortgage-backed bonds. Buyers borrowed too much money and cannot pay the interest and now there are mass foreclosures. It has come to light that a trillion dollars in mortgage loans will not be repaid. This implies that the money available for mortgages is falling and therefore house prices keep falling. Also note that unlike earlier years, most lenders now require a 20% initial down payment.
That will eliminate many buyers from the market, driving down prices. Nationally, 25% of houses bought during the last few years were based on speculation and not bought to live in, and the speculators are thus going into foreclosure in large numbers now. Even the National Association of House Builders concedes that investor-driven price appreciation looms over many housing markets. It has also become common practice for speculators to avail a loan far in excess of the price of the house he intends to buy. The appraiser abets in obtaining the inflated price offer and strangely he is never asked to do another appraisal. The speculator then pays the seller his asking price and uses the extra money to make mortgage payments on the unreasonably large mortgage.
High house prices have become unaffordable to new families, especially those with children. It is literally impossible for them to buy at current prices but government appears to prefer to make sure bankers have plenty of debt to earn interest on. A lot of vacation homes and condos are bought by people with no experience and probably no knowledge of real estate for making huge profits. These vulnerable amateurs are the avaricious innocents who start a real estate crash.
You will do well to remember that mortgage brokers may look like acting for you, but they are not. They will obviously be working for themselves. Are we then to conclude that mortgage brokers can not be friends of their clients?
But new laws that are being contemplated could change the equation. A law passed by Illinois legislators earlier this month and backed by state Attorney General Lisa Madigan aims to do just that. The law envisages a "fiduciary duty" to mortgage brokers, making them legally bound to do the best thing for their clients. Similar laws are under consideration in other states in US. In Minnesota, legislators recently approved new rules defining mortgage brokers as agents of home buyers, requiring them to act in clients' best interest. But similar measures in Iowa and Colorado were defeated.
As things stand today, mortgage brokers have no such fiduciary duty towards their home-buying clients. Brokers regularly recommend loans driven by selfish interests because they stand to gain financially. It is certainly not unlawful for a mortgage broker to persuade a client into paying a higher interest rate for a loan so that he can pocket the difference, or to prevail upon a buyer to agree to a pre-payment penalty so the broker rewarded with a bonus from the bank.
A majority of home buyers run after mortgage brokers, primarily for two reasons - either they want a person to practically guide them through the mortgage process or they are keen on getting a cheaper loan. The first reason has no meaning as there's only one kind of loan - the traditional fixed-rate loan with 5, 10 or 20 percent down. You certainly do not require a mortgage broker to educate you about these choices. If you are a daredevil in taking financial risks, then you may opt for some weird loans, but even in that case, you do not need a broker to explain the nature of those loans.
As regards the second reason, it is true that a few brokers may be able to get you better terms. The only way to find out is getting two estimates from two reliable brokers and one from the bank on the same day for the same kind of loan. Always consider your broker as a commission agent having valuable expertise - butt ensure you keep him at arm's length without giving him any opportunity to exploit you.
Any mortgage broker will help you free of charge how to act on the three most important issues:
How to advertise effectively to attract as many prospective buyers as possible to inspect your home?
What types of mortgage loans does your home qualify for?
Will the intending buyer qualify for a loan?
You may end up wasting a lot of time with a buyer who sincerely wants to buy your home but does not qualify because of credit issues or inadequate income. This is where your mortgage broker can play a useful role. Besides, most people who view your home will not be candid or forthcoming with you but they will confide with a third party like a mortgage broker.
Banks invariably have only few programs and are not willing to work with anyone who has less than a perfect portfolio. But a full service mortgage broker has every conceivable loan product, which means your buyer will never be turned away. Most brokers have 40 to 60 different lenders and can usually get better terms and rates than a bank.
When it comes to Real Estate Investing, if you are selling a home or any other real estate property, you should hire a real estate lawyer who can handle all the transactions. Hiring a real estate lawyer is sure to cost you some extra money but it is wise to make use of their services of a legal professional to protect your interests throughout the process of home sale.
Do not fail to take advantage of outside finance as banks are willingly coming forward to lend money to buy houses. This is because unlike other forms of investing, banks have enough money to keep if you decide to foreclose. Banks are usually not as willing to give loans for stock or gold investing because the value of your stocks may dwindle by the time you sell them. And gold prices fluctuate. The worth of real estate, on the other hand, is always steady and may increase in value every year. Several hundreds of lucrative real estate investment opportunities are available in the market and with a little experience, knowledge, and desire, you can exploit them.
There is no denying the fact that real estate is today becoming a fast-paced and rewarding business proposition. Due to the high dollar amount of home sales, agents commissions are often very high which is what drives so many new people to into real estate every year. When you compare the time and money you spend for getting a real estate license, the potential yearly income you will make as a real estate agent, is formidable. In all such cases, you will certainly require professional help in ascertaining the value of the house.
You have to invariably consult an architect, real estate value or an experienced civil engineer to assess the total cost of the construction and its present day value. If the house is a few years old, then consider the then cost of construction and add today's land value to evaluate the worth.
The value of the building depreciates with every passing year. Verify with the banks the depreciation value and deduct the same from the total assessed value.
Charge reasonable rents for your property. Have good terms with your tenants. Never fail to satisfy their reasonable needs. Make sure to get rental or lease agreement letter from the tenants for confirming the status of tenancy. Be careful with the contents of the rental or lease agreement.
He will be able to help you evaluate complicated sales offer and also evaluate complicated leases and mortgages. He can even review the contracts and closing process for the home sale. The services of a real estate lawyer are recommended to any sellers who don't have much experience with home selling. Spending a small amount of money for a professional to take care of your best interests will save you from lot of headaches as well as money.
Most people clamour for spacious homes little realizing additional space is costly and also difficulty to maimtain. The question most prospective home buyers find intriguing is how much home space one exactly needs to feel happy and comfortable. Most real estate analysts opine the right home size depends on several factors like the stage of one's life, family size, life style,financial limitations, visitors etc.
In the present day world when opportunities and choices galore are available, there is a natural tendency to acquire things that we do not really need. There are people who live in commodious and disproportionately large homes where quite a few rooms are never used. It is quite often much more comfortable to live in smaller homes that are designed well and where the family members can bond better than large mansions. However, the owners of the oversized homes claim they have earned enough to afford lavish homes and the size of their homes give them a sense of pride.A variety of housing types and sizes are available in the market for people with enough money who look to a range of options.
They may decide to sell their large suburban home for an urban center condominium, a cottage, a townhouse or any other smaller dwelling. But they seldom feel they are sacrificing space because they are trading large quantity of space for better quality of space. The kitchen may shrink to half the size, but the counters are granite and the appliances stainless steel.Some of the key factors for agreeing to less home space are the lifestyle of the buyers, the quality of the neighborhood and the availability of amenities nearby. Lifestyle people like to stroll and expect pleasant sidewalks or trails. They look forward to a coffee house within easy reach. These people also desire common open spaces and/or parks nearby to serve as a substitute for the missing back yard.
They are willing to settle for smaller homes if they can command other facilities like schools, hospitals and grocery stores in the vicinity.Builders of lifestyle homes make available to their clients homes with the right ambience and combination of amenities that appeals to their customers.. Builders who aim at the lifestyle market provide some of these amenities, but it is not in their hands to create all the features of a neighborhood to attract these affluent people. Therefore, the lifestyle market requires either a high level of existing amenities or a substantial public and private investment to create them.Most people looking to buy homes prefer larger houses but simply cannot afford them, or are unwilling to buy a larger house if located in peripheral areas. These buyers decide to forego space but not time. They would prefer arriving home from workplace in a half hour than to a large house in 90 minutes.
The ideal solution will be to provide as many of the features of a large house as possible in a smaller house. This means retaining the car garage, the master bath, three bedrooms and the main living room, while giving up the formal dining room, bonus room and utility room. Careful architecture research is required to get exactly the right floor plan into a probable 1,500 square feet.The buyers of smaller homes want public spaces to make up for their missing private spaces. Compact neighborhoods that target the less affluent buyers need not necessarily provide a nearby coffee shop, but generous parks and play areas and safe streets instead.
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